Synopsys (NASDAQ:SNPS) reported what executives described as a strong start to fiscal 2026, with first-quarter revenue at the high end of guidance and non-GAAP earnings per share exceeding expectations. President and CEO Sassine Ghazi and CFO Shelagh Glaser also reiterated full-year revenue, non-GAAP operating margin, and cash flow targets while raising non-GAAP EPS guidance, citing lower net other and interest expense in the quarter.
Management highlights: AI, digital twins, and the Synopsys-plus-Ansys strategy
Ghazi framed current demand as “a tale of two markets,” saying AI infrastructure build-outs continue to drive robust system-level and semiconductor R&D and AI compute design starts, while design starts in consumer, automotive, and industrial end markets remain subdued, despite “signals of modest recovery.” He also addressed investor concerns that generative AI could disrupt software vendors, arguing Synopsys’ engineering software requires “optimal, deterministic, silicon-proven results” that “probabilistic AI models do not replicate.”
Segment commentary: Design Automation strength, transitional year in IP
In Design Automation, Ghazi said the quarter featured continued strength in hardware-assisted verification, including “major competitive wins” and a “marquee emulation win versus the incumbent at a leading AI HPC customer.” He added that demand is rising for “software-defined, configurable systems” supporting both emulation and prototyping and pointed to the company’s roadmap as positioning Synopsys to capture a growing digital twin opportunity.
Within EDA software, he highlighted momentum around three themes:
- AI across the stack: Ghazi said customers using Synopsys.ai have seen up to 50% faster knowledge assistance, up to 70% faster workflow assistance, and up to 5x faster formal test bench generation. He added that AgentEngineer engagements are underway across design and verification.
- Multi-die: He said multi-die momentum “accelerated” as customers adopted the 3DIC Compiler platform, using automation and AI-driven optimization along with multiphysics analysis to improve quality of results and speed design convergence.
- Advanced-node design wins: He said Synopsys’ digital flow, including Fusion Compiler and PrimeTime, achieved “100% usage on critical tapeouts at 2 nm and below.”
In Design IP, management reiterated that fiscal 2026 is a “transitional year.” Ghazi said the planned sale of the processor IP solutions business to GlobalFoundries is intended to sharpen focus on interface and foundation IP. He cited more than 40 PCIe design wins in the quarter, an “industry-first demonstration of PCIe 8.0,” and a first-to-market position for 224G SerDes on advanced nodes and leading foundries, with “10 lifetime wins.” While expecting muted growth for IP in fiscal 2026 with sequential improvement, he said longer-term drivers include foundry expansion, faster standards evolution, and demand for chiplets and subsystems.
Ansys: Strong quarter, integration progress, and early cross-selling
Ghazi said Ansys delivered a strong first quarter driven by demand for system-level digital engineering, multiphysics simulation, and AI-enabled design flows, including large multi-year agreements across aerospace, hyperscale, industrial, and automotive. He noted that Synopsys now supports more than 90% of the top 100 automotive suppliers and referenced a CES showcase of AI-driven simulation helping Audi reduce physical prototyping and shorten development cycles.
On integration, management said joint Synopsys-Ansys solutions are expected to arrive in phases, with the first wave targeted for the first half of fiscal 2026 and monetization anticipated to begin in fiscal 2027. Glaser added that the teams are already trained for cross-selling existing products in both directions, though the company did not provide specific revenue figures for 2026 cross-sell contributions.
Financial results: Revenue $2.41B, backlog $11.3B, free cash flow $822M
Glaser reported total revenue of $2.41 billion, at the high end of guidance, attributing the upside primarily to the timing of Ansys deals. Ansys revenue was approximately $886 million in the quarter. She also noted that comparisons include the Optical Solutions Group, which was divested in the fourth quarter of fiscal 2025.
Non-GAAP operating margin was 42.1%, with non-GAAP costs and expenses of $1.4 billion at the low end of the guided range due to timing. GAAP EPS was $0.34 and non-GAAP EPS was $3.77, which exceeded guidance due to revenue and expense timing as well as lower net other and interest expense. Backlog ended at $11.3 billion.
By segment, Design Automation revenue was approximately $2.0 billion, with adjusted operating margin of 47.3%. Design IP revenue was $407 million, down about 6% year-over-year and flat sequentially, with adjusted operating margin of 16.2%.
Free cash flow was approximately $822 million, and the company ended the quarter with $2.2 billion in cash and short-term investments and $10 billion in total debt. Glaser said Synopsys repaid the entirety of its $4.3 billion term loans.
Guidance and capital allocation: EPS raised, buyback expanded
For fiscal 2026, Synopsys reiterated revenue guidance of $9.56 billion to $9.66 billion and said it expects Ansys revenue contribution of $2.9 billion at the midpoint, “growing double digits.” The company maintained its non-GAAP operating margin outlook (40.5% at the midpoint) and its free cash flow target of approximately $1.9 billion (based on about $2.2 billion in operating cash flow and about $300 million in capex). It raised full-year non-GAAP EPS guidance to $14.38 to $14.46, up $0.06 from prior guidance, reflecting lower net other and interest expense in Q1.
For the second quarter, Synopsys guided revenue to $2.225 billion to $2.275 billion and non-GAAP EPS to $3.11 to $3.17.
On capital returns, Glaser said the board replenished the company’s stock repurchase program with authorization to buy up to $2 billion of common stock. She said capital allocation priorities remain investing in the business, with flexibility for opportunistic share repurchases while paying down debt.
About Synopsys (NASDAQ:SNPS)
Synopsys, Inc is a leading provider of electronic design automation (EDA) software and semiconductor intellectual property (IP) used to design, verify and manufacture integrated circuits and complex systems-on-chip (SoCs). Its product portfolio spans tools and technologies for front‑end design and synthesis, simulation and verification, physical implementation and signoff, and design-for-manufacturability, enabling chip designers to move from architecture through tape‑out.
In addition to core EDA offerings, Synopsys supplies a broad set of semiconductor IP building blocks — such as interface, memory and analog/mixed-signal cores — that customers integrate into SoCs to accelerate development.
